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In Hong Kong, Chinese Communist raincoats sold last week for 40% less than in Canton. The Japanese admitted that Chinese underselling had "destroyed" Japan's newsprint and grey cotton sheetings exports throughout Southeast Asia, now threatened to undermine Japan's markets in soybean oil, cement, structural steel, window glass. In Jakarta, Indonesians were snapping up Chinese yarn at $390 a bale, $25 cheaper than Japan's yarn. In Thailand, Japanese cotton piece goods had been virtually driven from the market by Chinese prices, which were as much as 15% lower. Other Red bestsellers: bicycles, sewing machines and scented cotton prints. Even in strictly anti-Communist South Viet Nam, where border guards check all cars and passengers to block entry of Chinese goods from Cambodia, Saigon's counters hold China's fountain pens, records, needles, thermos bottles and textiles.
Victims of Illusion. By hitting Japan economically, where it is most sensitive (Japan's trade deficit was $1.4 billion last year), the Chinese Reds hope to stir up opposition to Premier Kishi and support for Peking-Tokyo trade. The Reds glibly dangle the bait of "600 million customers" before the eyes of Tokyo businessmen, although experience has shown that neither Communist China nor Japan has any great desire to buy the kind of consumer goods the other has to sell. Japanese businessmen also soon discover that they can deal only with state-owned Communist trading corporations rather than "600 million customers."
The prosperous Japanese economy is currently feeling the pinch of recession—production is down, stockpiles and unemployment are up. Chinese steel production has quadrupled (but is still only 5,000,000 metric tons compared to Japan's 12.5 million), China's machine-tool production, doubled, is now almost on a par with Japan's.
Japan has long since lost the markets, the raw materials and the steel mills of Manchuria. And though Japan still thrives on cheap labor, wages have risen. Japanese heavy industry is plagued by high costs because of its dependence on imported raw materials. In the battle for Southeast Asia's markets, the Japanese must still fight the resentments incurred in World War II. The Japanese hope: financial help from the U.S.